HDFC Bank, India’s largest private lender, is preparing a two-pronged strategy to address the issue of digital outage reported in the recent past. The lender expects to implement a short-term plan to fix the digital outage over the next 10-12 weeks. The details of this plan will be submitted to the Reserve Bank of India (RBI) soon.
The short-term plan is aimed at fixing the technical issues that led to recent multiple outage on HDFC Bank’s digital banking channels. Once the short-term plan is implemented, the bank hopes to get a reprieve from the regulator on new digital launches, said a person aware of the plan. But, the final decision on this should come from the RBI after an inspection.
“We are looking at 10-12 weeks to work on the short term action plan and submit to the regulator. From thereon, it is upto the regulator and its prerogative to give us the go ahead,” said the person requesting anonymity.
While the short-term action plan is the first stage, this will be followed up with a long-term plan on cloud computing, architectural efficiencies, disaster recovery processes, which could take 12 to 18 months, the person said. The bank has taken the recent instances of digital outage seriously and would want to avert similar incidents going ahead.
On December 3, HDFC Bank announced that the RBI asked the bank to temporarily stop all launches under its Digital 2.0 initiative and stop sourcing new credit card customers. The announcement came after the bank experienced multiple outage in its internet banking, mobile banking and payment utility services over the past two years.
Rating agencies have taken note. Multiple digital outage reported by the bank are credit negative, global rating agency Moody’s said on December 7. In a letter to customers, HDFC Bank’s CEO Sashidhar Jagdishan said the bank will comply with the RBI regulations and will wait for the regulator’s clearance before launching new products.
Following the multiple reports of digital outage, the RBI had looked at the matter and sought details from the bank. Recently, RBI Governor Shaktikanta Das said that banks must invest more in building robust IT platforms to fortify public confidence in digital banking.
“More investment is required by all stakeholders for building robust IT platforms and technologies for operational purposes as well as for fortifying public confidence in digital banking, especially when the financial landscape is rapidly embracing new technologies,” Das wrote in the foreword of RBI Financial Stability Report (FSR).
Acknowledging that information technology platforms and digital payment systems have provided considerable support for business continuity and smooth functioning during the pandemic, Das said digital technologies have been identified as a bright spot in India’s economic prospects.
HDFC Bank is not the only lender which has faced digital outage. Recently, State Bank of India’s YONO app, which is a platform for various digital transactions, too faced prolonged technical glitches. The bank has addressed the problem subsequently.
More banks are now turning aggressive on digital banking channels to reduce the dependency on traditional brick and mortar models and catch the younger generation who are more tech-savvy. As against the traditional banking, digital transactions are more convenient and most of these can be done round the clock.
Recently, the RBI had made the Real Time Gross Settlement System (RTGS) available round the clock on all days from 12.30 AM December 14. With this, India became one of the few countries in the world to operate its RTGS system round the clock throughout the year.
This came within a year of operationalising NEFT 24x7 by the RBI, the central bank said. Transactions worth a minimum of Rs 2 lakh or more can be done via RTGS with no maximum ceiling as per RBI.
Digital transactions have picked up in the recent past. Digital transactions exhibited a sustained recovery and momentum picked up in November 2020, supported by both wholesale and retail transactions, RBI data showed in December.
In the retail segment, national electronic funds transfer (NEFT) transactions volume grew 24.6 percent YoY in November 2020, much higher than the growth (13.9 percent) recorded a month ago. The growth in the value of NEFT transactions in November 2020 (27.9 percent) was higher than that recorded in October 2020 (20.1 percent), the RBI data showed.
In value terms, UPI transactions to the tune of Rs 3.9 lakh crore happened while IMPS transactions worth Rs 2.76 lakh crore happened. Also, RTGS transactions worth Rs 79.8 lakh crore and NEFT worth Rs 22.18 lakh crore were reported, data showed.